Yesterday I discussed a way to stay in on Green Mountain (GMCR). Today, let’s continue that trade. (December 05, 2012)
GMCR
Good evening Dan Fitzpatrick here at StockMarketMentor.com on Wednesday, December 5th. As long as Green Mountain ( $GMCR Green Mountain Coffee Roasters Inc ) keeps working I’m going to keep talking about here. Let’s take a look at it again. Remember yesterday I mentioned that what we want to look for in a top is, and no I’m not calling a top here, but I want to talk about it. What we talked about is how you’re going to see a stock, you’re going to likely see it kind of gap up or maybe not gap but it’ll open up at a certain level, trade-up high during the day but then come back and close right about at the price that it opened, perhaps even lower than the price that it opened, but what we’re really going to see is this big intraday turnaround and it would occur on really, really high volume. Well, what happened today? First of all it occurred on really, really high volume, we got the big move higher, there’s no question about it guys, this is a short squeeze, this is what we live for. The stock did reverse during the day, let’s look at the intraday chart, you can see what happened, went up, basically reversed here and then started drifting lower. This though, is not a reversal, at least I don’t see it as a reversal and this is why. Because you didn’t get on an intraday basis and this is a five-minute chart you know, we got the initial move but then it was just kind of a drift sideways. What I want to see is called an exhaustion move, I want to see a blow off where the stock just really moves higher and I’m talking intraday, on really, really big volume, I want to see a big move intraday, a big massive volume along with it and then a move down. That’s when I will know, and it’s pretty much a no that this is a blow off top. I don’t think we have that here with Green Mountain ( $GMCR Green Mountain Coffee Roasters Inc ) because it was just kind of a drift sideways and the stock still closed up almost a percent higher than yesterday; you really want to see the stock actually close lower and you want to see it close lower than yesterday’s intraday high here or you know, yesterdays close which is $40.78. I guess you could say this is a bearish sign, let’s just say I view it as a yellow flag and I view it as a yellow flag because the stock did close near the low of the day, it closed in the lower third of the range, volume was really high, there was a spike but this is, in my view, not necessarily a turnaround. But I’ll be watching this thing tomorrow because if this does start drifting lower from here, I think you definitely want to get out of your long position and so what I would suggest doing is the same thing I suggested before and that is using the prior days intraday low as a reference for your stops. So stand today, and this would have been a very, very loose stop, but you would have used this low here as a reference for your stops so you’d have stayed long. Today, or I should say tomorrow, on Thursday, this is much easier, you can use the intraday low of $40.30, which is less than $1.00, where the stock is trading now, you can use that as your reference for a stop. So say, you know, you put it at $40.25, then the only way you’re going to get stopped out is if Green Mountain ( $GMCR Green Mountain Coffee Roasters Inc ) prints a lower intraday low. This will allow you to stay with the trade longer than you normally would, give the trade room to run, but you’re still locking in a really nice profit if your stop does get hit. Also know that picking the tops of these, unless you see an obvious blow off top, and if you haven’t seen one, if it happens here, trust me, I’ll be telling you about it. Blow off tops are really, really obvious, this is not it, not yet, maybe we’ll see something tomorrow, but frankly, this isn’t that kind of a setup, that’s for another day. So as long as you can just stay with the trade as long as possible you’re going to do just fine, but know that when you just decide you’re selling here, I’m going to sell; know that what you’re really doing is you’re picking a top because if you knew the stock was going to keep going higher you wouldn’t sell, would you? So just to make an outright sell on a stock, and by the way, if you bought it at $28.00 now it’s up at $41.00, it’s really okay to sell, nobody’s going to eat your lunch for that, but if you really want to let your profits run, rather than just selling the stock, instead, just keep using a trailing stop and use the prior days intraday lows as references and you’re going to do just fine. Okay members, a lot of stuff to go over in this Strategy Session; there’s some sectors that are starting to move a little bit different than the ones we’ve been covering so I want you to get over there and check that out tonight. Free Chart